Development managing the risk a presentation by ROGER FORD MRICS London, 29 th June 2004

Why Develop? access to product cheaper than buying existing stock control of quality and quantity of product multiple exit scenarios Overview

What are the principal development costs? land acquisition – land price, taxes, advisory costs fees – planning, architect, legal, marketing, project management construction marketing / tenants’ incentives finance costs Overview

How are development costs financed? equity - cash equity - forward funding debt Overview

How are investment returns achieved? sale of completed scheme sale price – development costs = capital return investment retention rental income / development costs = income return refinance of capital Overview

RISK MANAGEMENT specialist project managers specialist investment managers experienced and qualified professional team Lack of co-ordination between development team increases costs and extends PC horizon Project use only specialist construction and property lawyers Obligations of various parties not properly documented Documentation forward funding moderate level of leverage hedging instruments Interest rates increaseFinance pre sales to reliable purchasers agreements for lease residual value insurance Market rents or capital values fall between start of project and completion Market appoint quality contractor properly drafted fixed price contract cost overrun guarantees insurance Building contractor does not perform Construction appoint specialist planning consultant option to purchase agreement conditional land acquisition joint venture with land owner Unable to achieve the necessary planning consents Planning How can these risks be managed?What Can Go Wrong?Principal Risks Equity Finance Low risk Debt Finance High risk

The Key Development Stages

The Good Development Essentials  assemble experienced development team  minimise costs until risks can be controlled  underwrite exit position  employ only the best building contractor  diversify capital exposure against a number of projects and markets

…. and finally, please remember …. development belongs to the value adding world of Islamic banking the ABCIB specialist property team is here to help the Islamic Investor with care and attention Islamic investors will once again outperform

Development managing the risk a presentation by ROGER FORD MRICS London, 29 th June 2004